TITLE IV--STUDENT ASSISTANCE

Part B--Federal Family Education Loan Program

SEC. 423. UNSUBSIDIZED LOANS

`(b) ELIGIBLE BORROWERS- Any student meeting the requirements for student eligibility under section 484 (including graduate and professional students as defined in regulations promulgated by the Secretary) shall be entitled to borrow an unsubsidized Federal Stafford Loan if the eligible institution at which the student has been accepted for enrollment, or at which the student is in attendance, has--

`(1) determined and documented the student's need for the loan based on the student's estimated cost of attendance (as determined under section 472) and the student's estimated financial assistance, including a loan which qualifies for interest subsidy payments under section 428; and

`(2) provided the lender a statement--

`(A) certifying the eligibility of the student to receive a loan under this section and the amount of the loan for which such student is eligible, in accordance with subsection (c); and

`(B) setting forth a schedule for disbursement of the proceeds of the loan in installments, consistent with the requirements of section 428G.'.

(b) LOAN LIMITS- Section 428H(d) is amended--

(1) in paragraph (2)--

(A) in the matter preceding subparagraph (A)--

(i) by inserting `(as defined in section 481(a)(2))' after `academic year'; and

(ii) by striking `or in any period of 7 consecutive months, whichever is longer,';

`(ii) if such student is enrolled in a program of undergraduate education which is less than one academic year, the maximum annual loan amount that such student may receive may not exceed the amount that bears the same ratio to the amount specified in clause (i) as the length of such program measured in semester, trimester, quarter, or clock hours bears to one academic year;'.

(C) in subparagraph (C), by inserting `and' after the semicolon; and

(D) by inserting before the matter following subparagraph (C) the following:

`(D) in the case of a student enrolled in coursework specified in sections 484(b)(3)(B) and 484(b)(4)(B)--

`(i) $4,000 for coursework necessary for enrollment in an undergraduate degree or certificate program, and, in the case of a student who has obtained a baccalaureate degree, $5,000 for coursework necessary for enrollment in a graduate or professional program; and

`(ii) in the case of a student who has obtained a baccalaureate degree, $5,000 for coursework necessary for a professional credential or certification from a State required for employment as a teacher in an elementary or secondary school;'; and

(2) in paragraph (3), by adding at the end the following: `Interest capitalized shall not be deemed to exceed such maximum aggregate amount.'.

(c) CAPITALIZATION OF INTEREST- Paragraph (2) of section 428H(e) is amended to read as follows:

`(2) CAPITALIZATION OF INTEREST- (A) Interest on loans made under this section for which payments of principal are not required during the in-school and grace periods or for which payments are deferred under sections 427(a)(2)(C) and 428(b)(1)(M) shall, if agreed upon by the borrower and the lender--

`(i) be paid monthly or quarterly; or

`(ii) be added to the principal amount of the loan by the lender only--

`(I) when the loan enters repayment;

`(II) at the expiration of a grace period, in the case of a loan that qualifies for a grace period;

`(III) at the expiration of a period of deferment or forbearance; or

`(IV) when the borrower defaults.

`(B) The capitalization of interest described in subparagraph (A) shall not be deemed to exceed the annual insurable limit on account of the student.'.

(d) EXTENDED REPAYMENT PLAN- Section 428H(e)(6) is amended by striking `10 year repayment period under section 428(b)(1)(D)' and inserting `repayment period under section 428(b)(9)'.

(e) QUALIFICATION- Section 428H(e) is amended by adding at the end the following:

`(7) QUALIFICATION FOR FORBEARANCE- A lender may grant the borrower of a loan under this section a forbearance for a period not to exceed 60 days if the lender reasonably determines that such a forbearance from collection activity is warranted following a borrower's request for forbearance, deferment, or a change in repayment plan, or a request to consolidate loans in order to collect or process appropriate supporting documentation related to the request. During any such period, interest on the loan shall accrue but not be capitalized.'.